Argentina, Brazil sign new car trade pact

BUENOS AIRES, June 11 (Reuters) - Argentina and Brazil
signed a new 12-month bilateral car trade pact on Wednesday
giving Buenos Aires more favourable terms in view of its
shrinking trade surplus that is draining limited foreign
reserves.

Cars make up half of the $36 billion trade between the
neighbours, which have had numerous commercial disputes in
recent years.

The revival of the auto agreement is crucial to restore
trade volumes and help close widening gaps in their external
accounts. The pact expired last year during a dispute over its
terms.

The pact will allow Brazil to export $150 worth of cars for
each $100 in autos it imports from Argentina, without paying
tariffs.

The previous deal favored Brazil at a ratio of 1.95 to 1,
but both countries failed to reach an agreement before it
expired last year. Argentina had initially proposed to lower the
ratio to 1.3 to 1.

Brazil said the accord was also beneficial because it should
increase the volume of bilateral trade.

"The key issue is the volume of trade, and the ratio agreed
favours the free flow of commerce between both countries,"
Brazilian Trade Minister Mauro Borges told a news conference in
Buenos Aires.

Both countries agreed to freeze their current market share.
That means Brazilian cars cannot account for more than 44
percent of sales in Argentina, while Argentine cars cannot be
more than 11 percent of sales in Brazil.

Brazil and Argentina are important markets for automakers
such as Italy's Fiat SpA, Germany's Volkswagen AG
and U.S.-based General Motors Co and Ford
Motor Co.
(Reporting by Eliana Raszewski; Writing by Sarah Marsh. Editing
by Andre Grenon)